How does debt usually occur?

This post isn't meant to be against anyone in debt, I'm just curious how people get into really bid debts such as those that I read about on the board. I regularly read posts on here and advise when I can, though many are far more qualified than me so I tend to read posts more than I post myself.

But I just wondered what the main reasons for people getting such a high level of debt are? Do you not go to get help when you see it start to get out of control rather than wait until it is exceedingly high, or is it fear of facing up to it, or just that the whole point is that when in debt you don't notice how much you are overspending?

As I said this may sound like its an attack, but it honestly isn't (message boards are hard to portray how something's meant I find!) I'm just interested as I'm a student and in debt myself but at a level that is manageable and I am on a strict budget to stop it getting worse, and I wondered how debts get as big as they do
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Comments

  • poshpix
    poshpix Posts: 8 Forumite
    I guess that the answer is that some of it is irresponsible or overly optimistic about what will happen in the future. People do get complexity (like babies and weddings and stuff) in their lives and these can then drive debt up. After all the whole financial sector is selling debt like crazy and its hardly surprising that there are many who fall prey to them. (There is no logic here - if peole are willing to pay avstly over the odds for advertised goods and "designer" items, then surely the power of advartising has to be acknowledged. Also exposure to high lifestyle and glamourous aspirations comes every day via the TV, movies and print,a dn it sets up wants and needs that the advertisers are great at tapping into.)

    Your question seems a little naive since the life of a student is much simpler than running a business, hoilding down jobs and/or having a family. I sincerely hope that you stick to your pri=nciples and hold off debt in your life - but the fact that you already have a little shows that it isn't that easy to pull off.
  • meanmachine_2
    meanmachine_2 Posts: 2,624 Forumite
    First Anniversary Combo Breaker
    I'm guessing that a lot of debt is "kick started" by the shift from 2 people 2 incomes to 3 people on 1 income.

    Three mouths to feed, one salary, same (or even higher) overheads.

    And then what happens...? Whoops, out pops another baby, just as mum is about to go back to work to help pay off debt.

    I sometimes think modern day pressures on women to have careers doesn't always help with bills. A couple gets used to dual incomes then inevitably they take a hit when one of them falls pregnant.

    Just my two cents.

    In previous times, there would be a main breadwinner, and the income would be fairly consistent from day one to day 3001. It's also why I think borrowing heavily against two incomes is crazy.
  • Smiley_Mum
    Smiley_Mum Posts: 3,836 Forumite
    I've been Money Tipped!
    Whenever I saw Spendaholics (a programme on BBC3 about people who were seriously in debt who called in help etc), the spending in the young, single people who were featured was down to emotional triggers in their past. One was about a woman who was jealous of her sister who had it all, fancy job, living abroad etc etc and she was jealous of all that and she spent to compensate for the fact that she felt she was never acknowledged by her family for her efforts. Another one was about a woman who had lost her father while very small and her debts were mainly down to travelling etc as she felt most happy while abroad on holiday with her family when she was small and she was trying to recreate the feelings by travelling a lot. Most of the people featured though were single or part of a young couple, no children which is a good thing I suppose.

    My own debt stemmed from having to deck out a flat (over a period of time) and care for family with not a lot of savings and try and keep myself afloat too by treating myself and the family with days out here and there otherwise I would have gone mad. Thankfully it's been paid now and I do try to live within my means and not spend excessively on a credit card, put on it as little as possible. Try to pay for everything with cash, and parting with cash is a lot harder than passing plastic over the counter. I have found this site great for all the tips etc and info on it, it's great.

    I do spend a bit of time on here on the weekends so at least I'm not spending any money, just the electricity to run the computer. :D
    “Ordinary riches can be stolen, real riches cannot. In your soul are infinitely precious things that cannot be taken from you.” - Oscar Wilde
  • Xbigman
    Xbigman Posts: 3,884 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    Too many people today live beyond their means. I don't mean that they buy Rolls Royce's or anything, but that they are unrealistic in their spending and unwilling to compromise when things change. A couple where I work are about to have their house repossessed yet they have Sky, mobile phones and both smoke. Thats an extreme case I know, but millions of others are doing very similar things on a smaller scale. If you spend £10 per week more than you earn thats £520 a year and (with interest) 7.5k after 10 years. And thats if you are sensible and avoid bank charges/penalties.

    Coupled with money blindness this is a recipe for trouble. Money blindness is what is caused by easy credit, especially credit cards. You simply do not see just how much you are spending day to day. Money becomes monopoly money, that is where all the numbers start to mean nothing. Then one day, bam. The credit runs out.
    Regards



    X
    Xbigman's guide to a happy life.

    Eat properly
    Sleep properly
    Save some money
  • There are many reasons why people end up in debt. Anyone who has a mortgage and nothing else is technically 'in debt'.

    It's how you manage that debt that makes the difference.

    If you are responsible with money then having some debt can be worked to your advantage, i.e stoozing.

    If you are a bit of a shopaholic then credit is not for you - unless you can pay it all off.

    Life changing events mean some people go into debt through no real fault of their own - death in the family, divorce, loss of a job etc... but unfortunately for many, it's the live now pay later ethos - which is fine all the time you CAN pay. It's when you can't pay that your problems really start because of interest rates and penalties etc...

    Another reason why debt becomes a problem is that many people do not understand what they are signing up to. They fail to read the small print in credit agreements. Creditors are partly to blame for this becuase they make agreements hard to understand. However, there is always a cooling off period which by law must be allowed - therefore consumers CAN look again at what they have signed up to and they can do this AWAY from the shop.

    Creditors are only too willing to throw money at customers - but they don't do it out of the goodness of their heart. There is a price to pay for their seemingly generous nature - and the price is often very high.
  • Smiley_Mum
    Smiley_Mum Posts: 3,836 Forumite
    I've been Money Tipped!
    There is always some kind of price to pay for convenience/impatience, i.e. having something now rather than later.
    “Ordinary riches can be stolen, real riches cannot. In your soul are infinitely precious things that cannot be taken from you.” - Oscar Wilde
  • BWZN93
    BWZN93 Posts: 2,182 Forumite
    First Post First Anniversary Combo Breaker
    poshpix wrote:
    Your question seems a little naive since the life of a student is much simpler than running a business, hoilding down jobs and/or having a family.

    I think that is a little unfair to many students actually! I went to uni aged 22, and have just graduated this year. I worked full time from the age of 16 before I went to Uni, and have already started working again, post exams. I have to say, being a Student is a LOT harder than going to work - 9am-5am and then you go home then forget about it - unlike my degree, which was 50 hours of self directed reading, and 16 hours of lectures and tutorials, as well as an hour commute each way to Uni, and doing it on £4000 per year, and having to pay £280 a month rent for EVERY month, not just those when I am at uni.

    I just spent the best part of a year in my pyjamas going EVERYWHERE with a book in front of me, just to be able to do the work, and I am not stupid by any stretch of the imagination. Students under the grant system had an easier time of it, not having to worry about repaying the £14000 of debts I have accrued during MY time at university.

    Just because you might occasionally see students getting drunk or whatever, please do not let that opinion stick to all students. Some of my freinds have been surviving on £24 per week for all their food and bills, after they have paid out their accommodation. Students cannot claim any benefits at all, so every summer there is a mad rush to find a summer job before there is simply none available. The only thing we do not pay is Council Tax, everything else is paid for at the same rate you do. We dont get discounts for our food shopping, only in a few poxy clothes shops, and to be frank, for the last three years, I havent been able to afford to shop in those places anyway. In fact, I learned to knit, so I could make myself a winter jumper, because I couldnt afford one in the shops. I do not have a winter coat, because I cant afford one. And I have a pay as you go mobile, with only £10 a month to put on it, because I cant afford a contract, and the mobile itself, is a 1998 Nokia.

    Now, whilst I have that little rant out of the way, yes, we do choose to go to Uni, as do those who dont and choose to start up businesses, or have families when they cant really afford it. The difference is some of us get into too much debt and some get into manageable debt, and the OP was wondering how people 'didnt see it coming', and was not being naive in asking - as even she realises that she is "in debt myself but at a level that is manageable".

    Jo xx

    P.S - Nothing in this post is meant as a personal attack on anyone, whether in debt or not, I simply feel that students have been 'tarred with the same brush' for far too long, and it is my personal mission to ensure that we 'good' students are given the recognition we deserve as human beings, not drunken idiots, as is made out by most of the general population.
    #KiamaHouse
  • rainbow21
    rainbow21 Posts: 21 Forumite
    poshpix wrote:
    I guess that the answer is that some of it is irresponsible or overly optimistic about what will happen in the future. People do get complexity (like babies and weddings and stuff) in their lives and these can then drive debt up. After all the whole financial sector is selling debt like crazy and its hardly surprising that there are many who fall prey to them. (There is no logic here - if peole are willing to pay avstly over the odds for advertised goods and "designer" items, then surely the power of advartising has to be acknowledged. Also exposure to high lifestyle and glamourous aspirations comes every day via the TV, movies and print,a dn it sets up wants and needs that the advertisers are great at tapping into.)

    Your question seems a little naive since the life of a student is much simpler than running a business, hoilding down jobs and/or having a family. I sincerely hope that you stick to your pri=nciples and hold off debt in your life - but the fact that you already have a little shows that it isn't that easy to pull off.


    I by no means was trying to compare myself as a student to someone with a hell of a lot more financial burdens. I suppose I just put that in to show Im not someone who's got a perfect financial situation asking about those who don't. I wasn't meaning the question to be related to being a student, I was just illustrating my own circumstances.

    My boyfriend is working and he has got what could potentially be a debt problem but I'm trying to help him so it doesn't get out of control - I can see how his situation has got like it has (too much going out and buying CDs etc that he cannot afford) and it is mostly his own fault but his rent is a massive proportion of his salary so I can also see how it's hard to avoid as a 'good' income can quite easily be eaten up with day to day expenses.
  • meanmachine_2
    meanmachine_2 Posts: 2,624 Forumite
    First Anniversary Combo Breaker
    Unfortunately, a modern Western economy can only keep going if people keep spending.

    In the last five years apparently the economy has been "booming". Rubbish. It would only have been booming if we weren't over £500bn in debt (not including mortgages). That just proves we're not generating enough to feed our spending habits.

    In a modern economy without manufacturing, we'd all be in a deep recession if all of us were actually "money saving experts". Sad but true.

    And as for that awful Spendaholics programme, obviously they only choose people who seem to have been mentally damaged, as that makes for "good" telly. In reality, people simply suffer from envy and want to impress their friends and partners. Simple as that. You don't need to be a psychologist to work that out.

    Not true in all cases of course, and unhappy circumstances can suddenly plunge anyone into debt. But those people do, I think, manage to get back on their feet farily quickly, since they didn't actually have "bad" spending habits in the first place.
  • Becles
    Becles Posts: 13,164 Forumite
    Name Dropper First Post First Anniversary Photogenic
    I think a number of people live beyond their means and general attitudes have changed.

    Borrowing money used to be something to be ashamed of. Nowadays even if you buy a t-shirt for a couple of quid, some unqualified till assistant tries to push you into a store/credit card application. Most large purchases offer credit facilities as standard. Debt is so freely available on the high street to anyone who wants it. Companies are ruthless and will loan people more than they can really afford, as illustrated by recent press articles where people have taken their lives due to debt.

    I also think it is ironic that unqualified staff can try and sell you a store card, yet if you want to invest money, you have to have a full financial review with a qualified financial advisor. Even just a simple savings account at many banks/building societies these days requires a short interview with a staff member to check you are getting the best return. In the case of store cards I've found many staff don't even know crucial details like APR rates or interest free peroids.

    When I first married in 1994, we had second hand mis-matched furniture, and couldn't afford to replace carpets and curtains we'd inherited with the house. I've seen friends marry and/or set up home since and spent a fortune on redecorating their new house and everything has to be brand new and perfect. Yes it's nice to have new and matching things, but if it's paid for by borrowing it can cause problems. One friend was horrified that I mend clothes rather than throw them away and buy new ones.

    It also seems to be expected that you must have a holiday. I'm not going away this year as I simply can't afford it. Some people are horrified when they hear this as if it's a major tragic event. I could borrow and go away, but I don't see the point. It would be nice to see new places and get a bit of sunshine, but we can also enjoy ourselves at home with day trips to local places. May not get the weather but we won't be in debt.

    I think there is also a "must have now" culture. Many people decide they cannot save up for things they want, so they use credit to buy them now. My TV broke a couple of years ago, and my Mam was horrified that we were going to live without a TV until I'd saved up for a new one. They actually bought me one as a Christmas gift which I was very grateful for, but it was way more than they would normally spend on me.

    Once you have all these debts, anything could happen which means you can't repay them. Nobody's job is 100% secure, you may have an accidental pregnancy, you may get sick or have an accident, you relationship might break up........ the list goes on. Once you lose a salary for whatever reason, the major problems start as you can no longer pay the debt back.

    For the record, I do have some debts. Mine are left over from a relationship break up, and partly my own stupidity of trying to live the same 2 income lifestyle on my new reduced income. I've learned the error of my ways the hard way and I've turned into a right miser now :o
    Here I go again on my own....
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